18
Feb

Wrap – Week Ended 2/17/12

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1) Natural Gas Stocks Rebounding. From SWN to RRC, the gassier than not list is rebounding as current month futures make a bottom. While the talking heads have declared that gas has bottomed I think that's premature and am not upping natural gas exposure beyond current levels expect in special situations like SWN. Note the 12 month strip only got half the move of the near month's this past week as the strip knows we have the shoulder season looming in front of us and a most probable record early return to injections. Look for macro gas comments from a couple of big cap E&P players in Tuesday's post in the "The Week That Was Section". 

Closed trades last week:

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More comments forthcoming ....

67 Responses to “Wrap – Week Ended 2/17/12”

  1. 1
    italyinvestor Says:

    Z – some local utica color.  Spent some time today talking to a gathering pipeline contractor who is looking to put in a 12 to 18 inch line through our property to move product from CHK Carrol County wells.  The nearest pad to our property was just approved for its 5th well.  Talking to a co rep, and reading between the lines, it seems like the plan is to initially drill six horizontals per pad into the Utica/Point Pleasant with 3 running parallel generally to the NE and 3 to the SE.  Later they may reenter or drill new horizontals into the marcellus  layer to produce gas.  The pad near us drilled a marcellus horizontal which I think is a test that they reported IP at 696 MCF.  Well footprint sections run from 128 Ac (limited by a lease dispute otherwise it would have run longer) to 166 Ac.  These sections are consistent with GPOR's statement that they see one well per 160 Ac needed to drain the Utica.

  2. 2
    zman Says:

    Italy – thanks for the color, much appreciated. One question, when you say permitted for the 5th well, are you saying they went ahead and have drilled the initial well and 3 more? Generally, at this stage of the game, they would just drill the one to hold the acreage and then move on, coming back in a year or two as they downspaced. 

  3. 3
    zman Says:

    http://www.marketwatch.com/story/iran-sends-warships-into-mediterranean-sea-2012-02-18?link=MW_home_latest_news

  4. 4
    italyinvestor Says:

    Z – will work up a schematic and send it to you to show what they have permitted and what the pattern looks like.  I'm sure that they are drilling the third well from the pad. they could be on the fourth though and they just dropped the permit request for the 5th.  The rig was on site for a while, taken down last Nov, and came back early in Jan and has been working day and night since then. 

  5. 5
    zman Says:

    Thanks Italy, I'm sure its just parallel sticks, I am somewhat surprised by the decision to start out with pad drilling, not that they won't go to it eventually but that they would be working on spacing from the get go. Generally people don't have that kind of time, especially guys like CHK who have a boat load of acreage. My thought would be that this is a pilot area for testing downspacing. Do you have any of the well names? 

  6. 6
    italyinvestor Says:

    Yes parallel sticks.  The most permitted well, and the one that's going under our land, is the Bucey 21-14-4.  I count 11 different wells in Carrol county with multiple (three or more) permits from one pad.  Not sure how many are drilled, drilling or just permitted though.  I was thinking they were just trying to get some liquids increase quick in the core area, but that doesn't explain all the wells with multiple permits.  Some others with three or more multiples: Mangun (Mang,8h,3h), Neider (3h,8h, 10h,6h), West (3, 3h, 8h, 10h), Bailey (6, 6h,1h,3h), White (8h,10h,3h), Snoddy (5h, 1h,6h), Houyouse (8h,1h,6h), Lozier (1h,3h,5h).
    On Bucey:  The permit sequence: 3H 3/9/11, 3h M (marcell) 7/6/11, 5h 12/6/11, 6h 12/6/11, 1h 1/20/12.  I know they have drilled 3h, 3H M, and are either on 5H or 6H now. 
     

  7. 7
    italyinvestor Says:

    Note: some of the multiples seem to be the initial verts that they then permit to go horiz.  On Bucey they permitted the 3 well first then dropped a 3h later but I'm counting it as one well from the pad.

  8. 8
    zman Says:

    Thanks Italy, makes sense, thanks for the well name

  9. 9
    zman Says:

    Make sure to follow us here as well:

    http://seekingalpha.com/author/steve-zachritz/articles

    These articles are generally late and not in bullet point format but sometimes more refined. 

  10. 10
    nrgyman Says:

    Blackrock investing large into Brown Dense E&Ps.  Think they know something?  Thanks, Z, for the SWN pitch.  I have a good position, but this makes me feel a little greedy for more:
    http://www.eldoradonews.com/news/WireHeadlines/2012/02/16/blackrock-increases-stake-in-brown-dense-20.php
    Now if natgas weren't such a pain …

  11. 11
    brodway Says:

    "The Brown Dense is part of the old Smackover formation, which in the 1920s produced one of the first U.S. oil booms. "
     
    Gotta love it. Revitalizing the roaring 20's is exactly what this country needs. 
    Reading the Wikipedia description of the time period, its amazing how similar some of the issues we have today are  to those experienced during this time period. History always has a way to repeat itself.
    If Congress could just open up their history books and stop bickering about who did what to whom the US may just return to economic prosperity once again.
     
     
    The Roaring Twenties is a phrase used to describe the 1920s, principally in North America, but also in London, Berlin and Paris for a period of sustained economic prosperity. The phrase was meant to emphasize the period's social, artistic, and cultural dynamism. 'Normalcy' returned to politics in the wake of World War I, jazz music blossomed, the flapper redefined modern womanhood, Art Deco peaked, and finally the Wall Street Crash of 1929 served to punctuate the end of the era, as The Great Depression set in. The era was further distinguished by several long johns and realities of far-reaching importance, unprecedented industrial growth, accelerated consumer demand and aspirations, and significant changes in lifestyle and culture.
    The social and cultural features known as the Roaring Twenties began in leading metropolitan centers, especially Chicago, New Orleans, New York, Philadelphia, Paris and London, then spread widely in the aftermath of World War I. The United States gained dominance in world finance. Thus when Germany could no longer afford war reparations to Britain, France and other Allies, the Americans came up with theDawes Plan and Wall Street invested heavily in Germany, which repaid its reparations to nations that in turn used the dollars to pay off their war debts to Washington. By the middle of the decade, prosperity was widespread. The second half of the decade becoming known as the "Golden Twenties". In France and francophone Canada, they were also called the "années folles" ("Crazy Years").[1]
    The spirit of the Roaring Twenties was marked by a general feeling of discontinuity associated with modernity, a break with traditions. Everything seemed to be feasible through modern technology. New technologies, especially automobiles, moving pictures and radio proliferated 'modernity' to a large part of the population

  12. 12
    zman Says:

    ZMT, ZLT, ZLT C updated on the ZEB Positions tab

    http://zmansenergybrain.com/subscriber-data/holdings-wiki/

  13. 13
    crysball Says:

    Z, BOP, Zorg,  et al:
    Pattern Recognition:
    Spend  a lot  of  time  digesting  the   daily   Zman  blog  and  observe  that   pattern recognition…………and  in particular  detecting rates  of  acceleration [good old  1st & 2nd Derivaties]  in  production, cashflow, land  holdings  in a new or developing  play,  etc.]     seems   to be a reliable predictor of  future performance……….this  is by no  means  a quantitative   [Taguchi  Style] effort……..often has  a lot    to  do  with   'feel'   on  new & developing   plays  like  Brown Dense  and/or Utica].  
    Just   constantly  reviewing the process  on how    to find  the  'SWEET SPOT'    in  evaluating  risk/reward.
    My  perfromance    since  finding  Zman's  website  has  consistently  improved,  and  want  to thank Z,  his  staff, and  all those  who  contribute  here daily.

  14. 14
    tomdavis12 Says:

    Option Activity: NOG  Tot Vol – 59219 – Calls 11,096 Puts 48,123. Average daily volume 7,404. HK also also big activity but of course has not been around very long.

  15. 15
    zman Says:

    re 13 – you're welcome, have a great long weekend. ZLT at all time highs as of Friday and I continue to think that oil is ahead of itself and that we will see a significantly lull post 4Q earnings season (Ides of March mellowing?). 

  16. 16
    nrgyman Says:

    RE 15:  Do you anticipate you'll do some pruning or repositioning soon?

  17. 17
    zman Says:

    Yes, but not going to discuss names on the wrap which is open to the public. They will largely be some of the trading positions that were built up over summer/Fall/winter and then some of the names mentioned a week ago as cores that I think are redundant.  Some that already done if you note one name in particular in the ZMT. 

  18. 18
    brodway Says:

    Stifel has a different view of CHK than some of the larger investment banking outfits that recently downgraded the company
     
     
    Stifel Nicolaus raises its rating on Chesapeake Energy Corporation (NYSE: CHK [FREE Stock Trend Analysis]) to Buy from Hold as current price appears attractive as an entry point. Stifel Nicolaus establishes a $29 target price on shares.
    Stifel Nicolaus says, "Current stock level provides an attractive entry point. Since the recent July 2011 high for the space, CHK is down 30% while the EPX is down 16% due to natural gas price weakness and the resulting impact of funding issues. Concern is for those with a 3-9 month view. The low gas price causes two issues, the cash flow drops meaningfully resulting in the company's 2012 EV/EIBTDA valuation not necessarily looking attractive. Secondly, the funding gap widens creating additional concerns at the same time the EBITDA valuation is no longer looking attractive for those with a 3-9 month outlook."

  19. 19
    zman Says:

    US closed tomorrow but crude trading tonight at $104.50

    http://www.cx-portal.com/wti/oil_en.html

    Iran playing their game pretty perfectly. 

  20. 20
    zman Says:

    Crude $105 … on Iran ships in the Med? Silly. 

  21. 21
    ram Says:

    Iran stopped exporting oil to GB and France, IEA states that Saudis contracted supply and exports, tension in Mediteranean, China  stimulus, Greeks approve austerity – perfect storm??

  22. 22
    skimo Says:

    SSN enercom presentation:
    http://www.samsonoilandgas.com.au/IRM/Company/ShowPage.aspx/PDFs/1457-74723255/EnercomPresentation

  23. 23
    Zorgnak Says:

    Significant S&P Futures Levels for next week 2/20-24.
    After four attempts in Feb the 1352.50 level was broken to the upside and is now support.
    1362.50 is the last congestion level with much definition to it.  Demark weekly exhaustion "TD9" signal conirmed on Friday reflecting the now lenghty price extension. It's usually good for at least some sideways trading for several weeks. Short term studies suggesting a down bias for the next 5 days (OPEX Friday with S&P at high of 10 day range.Volume dropping two consecutive days
    at 50 day S&P highs. Several VIX ratios.)However, Volume, breadth, volatility and POMO studies still support the current intermediate trend .
    Bulls in control above 1345. Major support for trend at 1331.50. Expecting relative weakness this week with support levels to be tested and defended.  Watch the reaction at the support levels.
    Headline risk abounds. See #21 above

     

    1362.50 Minor CHVN………………was my upside target for the move…little overhead with volume beyond here.
    1352.50 Support/CLVN…………..expect bulls to defend on first test
    1347.50 Minor Support/CLVN…minor support prior to volume pivot at 1345. Possible headfake support on a break of 1352.50
    1345    Bullish pivot/MCHVN……pivot is rather broad..running from 1339-1345…expecting max chop in this area
    1331.50 Major Support/CLVN….previous breakout level and intermediate trend support
    1322.50 Acceptance/CHVN……..nearest major area of prior acceptance, possible downside target on correction of any size.
    1317.50 support/CLVN……………Key support. Expect volatility to pickup here.
    1310.50 Major Acceptance/CHVN

    http://www.charthub.com/images/2012/02/19/ES_Composite.png
     

  24. 24
    Zorgnak Says:

    XLE Levels
    XLE made it to major acceptance at 75. Buying was shut off at that point. Resistance at 75.5 support at 74.
    Expecting XLE to chop around in congestion above 74.
    75.50 Minor Resistance/CLVN 
    75 Major Acceptance/CHVN
    74 Minor Support/CLVN
    73 Major CLVN
    71 Major Acceptance
    70 Support/CLVN

    http://www.charthub.com/images/2012/02/19/Stock_Composite.png

     

  25. 25
    Zorgnak Says:

    Crude
    Broke above resistance at 103.90, a three month trading range and 10 month high. Currently trading above 1 year and long term acceptance.
    In rare air from 103.90  up…
    1 year acceptance 98.56-101. Long term acceptance at 98.56
    106.37 Resistance
    103.90 Support
    98-101 Major long and short term acceptance/Magnet
     
    http://www.charthub.com/images/2012/02/19/CL_Weekly.png

  26. 26
    Zorgnak Says:

    Josh Brown gets a little worked up here..
    http://www.thereformedbroker.com/2012/02/19/how-ahmadinejad-can-save-the-us-economy/

  27. 27
    zman Says:

    Ram – nice summation

    Ski – thanks, much more detailed section on the Montana Bakken, note they are going ahead and calling the area 35,000 net acres instead of the actual current holdings of 20,000

    Australia II – still calling it currently fraccing, that should be done about now or tomorrow

    The Montana Bakken pages have been updated, more color on the two wells, more color on the map on who is around them. All positive color in my book

    Zorg – thanks for the levels

    Market closed on Monday but I will be around. 

  28. 28
    skibbi9 Says:

    @22  Thanks skimo,  didn't notice anything particularly notable/new
     
     

  29. 29
    zman Says:

    SSN presentation differences I see tonight
    They have 20,000 net acres, they have said mostly likely case is they get backed into and then add 20,000 more net acres and get backed into on that as well leaving them 31,000 net acres …. now they are calling that 35,000 net acres
    The well detail is about the same as last presentation other than Australia II is now in progress on the frac
    Then went on to say they will get a newbuild skiddable rig if they like Australia II and Gretel II and will drill 4 long lateral tests with it. 
    The added the 200 bopd note to the comments on Defender

  30. 30
    zman Says:

    RIG plans to skip dividend. 

  31. 31
    Zorgnak Says:

    EOG Broke out of long term volume base in Feb.
    119    Congestion
    113.90 Minor Support
    112.19 Support
    108    Major Support
    http://www.charthub.com/images/2012/02/20/Stock_Composite.png

  32. 32
    Zorgnak Says:

    SWN Broke resistance at 34. Congestion starts from 36 to 39. Resistance at 40
    40    Resistance
    38    Acceptance/Congestion
    34    Support
    31.50 Support
    http://www.charthub.com/images/2012/02/20/Stock_Composite_3.png

  33. 33
    Zorgnak Says:

    RRC   Interesting chart. Pushing through wide low volume rejection area between 64-67. Doesn't figure to stay there long.
    66-67.50 Resistance
    64       support
    http://www.charthub.com/images/2012/02/20/Stock_Composite_4.png

  34. 34
    Zorgnak Says:

    REXX  Support around 10 seems solid. Long term acceptance at 12
    http://www.charthub.com/images/2012/02/20/Stock_Composite_5.png

  35. 35
    zman Says:

    Thanks Zorg – REXX increasingly interesting at these levels to me. 

  36. 36
    tomdavis12 Says:

    RIG will be announcing goodwill impairment charge. Earnings out after market 2/28. Stock cheap but they have been operationally challenged for some time. Be careful.

  37. 37
    zman Says:

    Tom – thanks, you're out this week correct?  Did you note RIG suspended the dividend as you long ago surmised they would? Nice job there. 

  38. 38
    Zorgnak Says:

    OAS Breaking above volume base at 32.50. Area from 33-33.50 has been a low volume rejection level(up and down). Note the multiple gaps. Movement likely
    to be fast in this area. Overhead volume declines quickly above 33.75. Long and short term volume demand positive.
    32.50 support
    http://www.charthub.com/images/2012/02/20/Stock_Composite_6

  39. 39
    tomdavis12 Says:

    37: Yes I am heading to Charleston SC tomorrow. Will have my laptop for an occasional flyby. Always interested in what the gang here has to say.

  40. 40
    tomdavis12 Says:

    RIG: The timing of their Aker merger was pretty weak. They had Macondo – downtime – newbuilds. Many issues that a multi $B merger made little sense at that time.

  41. 41
    Zorgnak Says:

    NOG  Choppy battle ground stock. 24-26 congestion.
    25.30 Major Acceptance
    24.50 Near Resistance
    24    Near support
    23    Support
    22.50 Major Support

    http://www.charthub.com/images/2012/02/20/Stock_Composite_8.png
     

  42. 42
    Zorgnak Says:

    KOG Low volume breakout attempt at 10.  Bulls in control above the 9.85 volume pivot.
    10 Resistance
    9.94 Minor Support
    9.85 Acceptance/CHVN
    9.50 Support
    http://www.charthub.com/images/2012/02/20/Stock_Composite_9.png

  43. 43
    Zorgnak Says:

    TPLM At resistance and or breakout point. Bulls in control above 7.45.
    http://www.charthub.com/images/2012/02/20/Stock_Composite_11.png

  44. 44
    brodway Says:

    Zorg…
    what is your take on FTK ? it broke through the 10.50 area last week down to 10.10 on Thursday and retested that same number on Friday before closing above the 10.50 mark. thanks.

  45. 45
    JMlr Says:

    Zorg, I'm relatively new to the site and enjoy looking at your charts and levels.  I have a few questions – wonder if you have time today with the mkt closed – what does CLVN stand for?  What are the blue/green/purple levels shown at the far right on the chart?  Is that volume?  Also what does the grey band running thru usually the middle of the chart horizontally represent?
    thank you!

  46. 46
    Zorgnak Says:

    FTK  Brod….I still see 10.55 area as significant. It was the high volume breakout point in January.
    The breakout setup was right out of the momentum traders textbook and the stock likely showed up on every
    breakout screen in the known universe. The stock made it to the Stock Twit's 50 attracting a lot of fast money.
    Volume petered out and it came in and bounced at 11 three times and sagged back to the original break out point. The one day dip to the low volume node at 10.13 filled a gap from 12/31/11 and has now snapped back to the 10.55 area.
    Long term volume demand is still positive so I'm viewing this swing pullback as complete. I'll be wrong if 10.13 is broken as short term volume demand fails to improve. In that case next support is at 9.50.
    Lot's of late  fast money breakout buyers are underwater from 11 up. I expect resistance at 11 and then again at 11.62.
    I don't own it atm….
    http://www.charthub.com/images/2012/02/20/Stock_Composite_15.png

  47. 47
    andy Says:

    z   maybe today u could take a look at evolution petroleum (EPM) latest presentation.  the main point he was stressing at ipaa was they are going to recieve a boatload of cash from Denbury over the next  years, as is spelled out on slide 14,, and they are going to have to do something with it, and he is the largest shareholder.   looks like a good prob to me. int in your opinion.  thks

  48. 48
    zman Says:

    Andy – will do. 

  49. 49
    Zorgnak Says:

    #45  JMlr

    CLVN = composite low volume node.  An area that has relatively little volume because for one reason or another the price has been rejected by either buyers or sellers as  unfair. Most often when price approaching the CLVN area results in a reversal to some degree. Occasionally  though the rejection can be a quick passage through the CLVN. It's the reaction to the level that is important and I offer them not as lines in the sand but areas of interest.  CLVNs are areas with the biggest edge for detecting support or resistance as price moves to extremes from previous areas of acceptance. A CLVN suggests a support or resistance level but if it fails that function the information is useful in that it shows a shift in market perception of value is at work and a shift from range to trending is a hand as market seeks the next  point of balance/acceptance.
    CHVN = composite high volume node. An area that has been heavily auctioned and accepted by both buyers and sellers.  Trade in this area is often choppy and edgeless as the volume is even balanced between buyers and sellers. Trading will often persist in these areas until new information comes into the market to upset the the balanced perception value. Momentum begins and ends in these areas as the bigger time frame money initiates buying or selling.
    Take a look at the S&P futures chart at the bottom and break it down a bit.
    The colored histogram on the right edge of the chart is the long term distribution of volume at price.
    The colored histograms to the left are always the short term distribution of volume at price .
    I use colors in the histograms to differentiate the intensity of volume at each price point. The bright orange
    areas represent where there was heavy acceptance of price. I refer to these areas as CHVNs The darker colors represent areas that
    have been lightly auctioned for various reasons. These are the CLVNs. 
    The grey lines mark the CLVNs. Notice that the CLVNs are positioned at relatively low volume points,  indentations into the
    long term volume histogram on the right.
    I hope this helped some. I've just scratched the surface of this type of charting.  The general principles apply to stocks as well, or buying and selling peanut butter for that matter.
    If you want to learn more about the terms I sling around check out  the glossary at the link below. If you want to move beyond that I can point you in a good direction to learn.
    S&P Volume Profile Chart
    http://www.charthub.com/images/2012/02/20/ES_Composite.png
    Glossary
    http://www.futurestrader71.com/?page_id=1280

     

  50. 50
    brodway Says:

    Re: 46
    Thanks Zorg . Your thoughts in many ways mirror my own. I originally had 9.50 as support, i believe this represented a 50% retracement of the recent move up  but reconsidered my decision based on your chartwork. Entered the position at 10.25 (25% of desired position) and will continue to monitor closely. 

  51. 51
    Zorgnak Says:

    IBD is highlighting the energy sector and several of the room names.
    APC KOG CJES ORIG BRY KEG GTLS
    http://sector-trends.blogspot.com/2012/02/weekly-sectorgroup-analysis-21912.html

  52. 52
    Zorgnak Says:

    #50…brod..FWIW ….just noticed a DeMark TD9 exhaustion signal was completed on Friday on the daily..

  53. 53
    JMlr Says:

    Zorg, thank you for the explanations and examples. very helpful

  54. 54
    Alhambra Says:

    http://www.bloomberg.com/news/2012-02-20/clinton-signs-accord-in-mexico-for-oil-exploration-with-state-owned-pemex.html

  55. 55
    john11 Says:

    Z, I know it got real busy last week but will you be swinging back to take a closer look at the new TRGL/ZaZa as time allows?  Thanks

  56. 56
    zman Says:

    Thanks Zorg

    John – yeah, I've got it still about half done, will get to soon. 

  57. 57
    zman Says:

    Busy week ahead, ton of mid-cap E&P earnings plus Enercom. 

  58. 58
    zman Says:

    COG on the tape, no mention of Brown Dense.

  59. 59
    Zorgnak Says:

    JMlr  #53

    You are welcome. I find what I do works best with trying to identify extremes in price movement away from value where sellers or buyers are likely to  become exhausted.
    It can be particularly effective when that extreme is away from Z's perception of intrinsic value as well.

  60. 60
    zman Says:

    re 59 – me too. 

  61. 61
    skimo Says:

    Joan now indicates that Chrevron is involved in Davy Jones and is excited. MAy not be news to all, but adds to the excitement as we wait and wait for DJ production news.
    http://www.forbes.com/sites/joanlappin/2012/02/20/a-little-bit-louder-now-chevron-starts-to-shout-about-davy-jones-and-the-ultra-deep/?partner=yahootix

  62. 62
    zman Says:

    re 61 – CVX is drilling the onshore well that ties into the ultra deep play, Lineham Creek (see Catalyst List). Excitement for CVX should be premature as that well is going to take a long time to drill, would not expect TD until 2H12. 

  63. 63
    Zorgnak Says:

    S&P Futures trading at the 1362.50 minor CHVN prior to the overnight Euro news.
    In case of a news pop, looking for an upside target at 1375.25 with far resistance at 1381 Minor CLVN. News drop has  support at 1352.50 CLVN
    http://www.charthub.com/images/2012/02/20/ES_Composite_6.png

  64. 64
    zman Says:

    Greek deal reached

  65. 65
    Zorgnak Says:

    WFT indicated to open sharply lower due to having to restate prior financial results

  66. 66
    Zorgnak Says:

    WPRT ,CMI – Wesport JV Deal with Cummins on New Engine

  67. 67
    dewalt table saw Says:

    Great information…

    Great information mazon.com amzon.com amazn.com amazon.cm…

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